BRUSSELS, Dec 4 (Justyna Pawlak/Reuters) - European Union states struggled to agree on Tuesday on a common response to Israel's plans to expand settlements in the West Bank, highlighting the divisions within the bloc over how to tackle the Palestinian-Israeli conflict.

At a meeting in Brussels, ambassadors responsible for security issues discussed the possibility of all 27 EU states writing to Tel Aviv to express their displeasure or calling in Israeli ambassadors for consultations, as five EU countries have already done.

No formal decisions were taken during the meeting and the issue will be discussed further on Friday, EU diplomats told Reuters. But it remains possible that language censoring Israel could be included in a statement to be issued by EU foreign ministers after a meeting on Dec. 10 in Brussels, they said.

We have agreed on a recommendation so it is not obligatory, one EU diplomat said, speaking on condition of anonymity.

Divisions in Europe over the Palestinian-Israeli conflict were highlighted last week when the bloc's 27 governments failed to find a common position on the United Nations General Assembly vote on a de facto recognition of a of state of Palestine.

Fourteen European governments backed the Palestinians' successful bid for a status upgrade at the U.N., but 12 abstained and one, the Czech Republic, voted against it.

The EU has repeatedly spoken out against Israeli settlements on land that the Palestinians want for their state, saying they hinder peace efforts and undermine the chances of creating a state of Palestine.

But some governments are wary of pushing the Israeli government too hard and hurting EU ambitions to build up its credentials as a power broker in the Middle East and bolster its voice on the diplomatic stage.

The EU is the biggest foreign aid donor to the Palestinians, providing them around 300 million euros ($393 million) a year from the EU budget. Individual governments add a similar amount in addition to that, with the funds spent on direct budget support, refugees and Palestinian institution-building.

EU officials argue that European support to Palestinian state-building efforts in the West Bank, and other policies, were an important ingredient of international efforts to solve the Palestinian-Israeli conflict.

But the EU's leverage with the Israelis is limited and its aid to the Palestinians far outweighed by Washington's economic and military support for Israel.

The United States has ratcheted up criticism of Israel over the new settlement plans, urging it to reconsider despite Prime Minister Benjamin Netanyahu's refusal to back down. Washington has so far stopped short of threatening any concrete measures against the Jewish state.